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Deutsche Bank CFO James Von Moltke Welcomes Volatility



The global chief financial officer of Deutsche Bank believes the market volatility of recent weeks will help the banking giant as emerges from a difficult period of scandal and poor performance.

James von Moltke, who has an Australian mother and a German father and carries an Australian passport, is helping steer Deutsche through a restructuring process, including by lifting the performance of its trading division. As with most banks around the world, low volatility has weighed on trading volumes and earnings.

“The recent increase in volatility, which was expected, is good for the business, no question,” Mr von Moltke told The Australian Financial Review at Deutsche’s Melbourne office.

“An adjustment in the marketplace away from the complacency that existed the last year is frankly warranted,” he said.

While Mr von Moltke’s Australian connections see him regularly visit these shores, his German heritage was one of the reasons he decided to join Deutsche Bank in mid-2017 in the midst of its dramatic restructuring.

His is a famous family name in Germany; Mr von Moltke’s grandfather, Helmuth James Graf von Moltke, was a well-known member of the resistance group that stood against Adolf Hitler.

“Of course for me from a nationality perspective, it had the irresistible appeal of going back to at least one of my two home countries,” Mr von Moltke said of his decision to join the bank and leave the US, where he was working for Citigroup.

“It seemed to me like an opportunity that I couldn’t resist.”

Mr von Moltke’s expertise in restructuring, earned particularly during his eight-year stint at Citigroup, was also key to his move.

Deutsche Bank emerged from the global financial crisis with its reputation badly damaged and mired in a series of scandals.

Last year it agreed to pay $US7.2 billion to settle a case with the US Department of Justice over the mis-selling of bonds, and was hit with fines from the British government over failing to prevent the laundering of $US10 billions of Russian money.

The bank’s financial performance has also been below par. In addition to settling legal matters, chief executive John Cryan has led an extensive restructuring process that has seen Deutsche combine its retail and commercial banking operations and move to spin off its asset management arm.

Deutsche Bank’s shares have fallen 20 per cent in the past 12 months, in stark contrast to the strong rises seen at the big investment banks in the United States.

But Mr Cyan said earlier this month the bank’s annual results – a loss of €0.5 billion for 2017, but its first pre-tax profit since 2014 – showed it had “put our house in order that we are on the right track”.

Mr von Moltke said that while there was still plenty of work to do in turning the group’s performance around,real progress had been made.

“The plan that we needed to put the problems of the past behind us, financially and otherwise, was absolutely true – you can’t move on carrying baggage. And then secondly this process of fixing some of our core technology and data processes and control capabilities, is another thing that we needed to focus on.

“While we made significant progress in building and fixing the foundation, obviously we are trying to manage the business, build the business, be with clients, grow revenues and improve profitability.”

Mr von Moltke said Deutsche Bank’s Australian franchise had held up well despite the global problems. Australian managing director Anthony Miller said he was looking forward to some clear air as the restructuring and remediation process gathered pace.

“We need 12 months where we get out in front of clients and do what we do really well and two things will happen – we will drive the income revenue that we are looking for and that in turn will engage our staff and remind them why they are part of our team.”

One of Mr von Moltke key tasks is to keep cutting costs inside Deutsche Bank without curtailing its ability to grow.

“One of my messages around our bank is that it’s 97,000 people, all of whom have to make decisions every day that affect costs. We are absolutely committed to our cost targets, and it is vital that we remain disciplined and become even more disciplined in some respects,” he said.

“I think companies too often go for sweeping announcements about numbers of employees, about costs over time … I think this is in some ways counter-cultural. In other words it makes it seem like cost is a one or two-year project and then you go back to business as usual.”

Some pundits have suggested Deutsche might be best to exit the ultra-competitive world of investment banking, but both Mr von Moltke and Mr Miller were quick to play down such suggestions.

“It’s who we are; you can’t wish away your starting point in terms of your business,” Mr von Moltke said.

“Deutsche Bank was founded to support corporate clients on an international level, which is the core of our corporate-led investment bank until today.”

While he describe Brexit as a “regrettable thing at least for the European economy”, he said it would emphasise the importance of Deutsche Bank’s home market.

“Once Brexit happens we are really the only fully capable Eurozone investment bank and Euro clearer.

“When I travel to a place like Australia the Australian government and clients look to us as a gateway to the eurozone increasingly.”

Another challenge in bringing expenses down is that big banks keep getting hit with regulatory change – be it the new MiFID rules in Europe, or the Basel III banking regime.

While Mr von Moltke was not enough across Australia’s banking sector royal commission to comment on its progress or outcome, he said the impact of any new legislation on the sector did need to be considered by regulators.

“It’s really challenging because the nature of the business is, regardless of what part of financial services you are in, highly complex. This means that it’s easy to get unwanted consequences when you pursue new regulatory initiatives.”

By James Thomson


Safaricom post-IPO investor wealth rises to Sh1.3trn peak




The Safaricom stock hit a historic peak recently, closing at a high of Sh32.80 per share on Friday, thereby swelling investor wealth eightfold since its listing on June 9, 2008, inclusive of dividends.
Shareholder wealth as measured by market capitalisation has now touched Sh1.314 trillion, representing an increase of a whopping Sh1.114 trillion from the time the company listed 40 billion shares at Sh5 a share 11 and a half years ago.
When the company’s cumulative dividend pay-out totalling Sh301.2 billion over the 12-year period is added, Safaricom investors have enjoyed a return of 708 percent on initial investment of Sh200 billion. The dividend alone has been enough to allow investors to recoup their capital at listing and remain with an additional Sh101.2 billion balance.
The gains last week also pushed the company valuation as a share of the entire market to 50.4 percent and underlined its dominance on the stock market. Crossing the 50 percent threshold means Safaricom’s market worth is now more than the combined valuation of all the other 61 listed companies.
Analysts have attributed the rally in the last one year to sustained foreign demand, with the growth in dividends being a key factor in driving its attractiveness to investors who have few other options to make money in the market.
“The feel-good factor surrounding Safaricom has spilled over into the New Year, on bullish sentiments by foreign investors,” said Standard Investment Bank analysts in a note.
Last year, the stock led the market in net foreign inflows at Sh4.6 billion, which backed a share price gain of 42 percent to Sh31.50 between January and December 2019. During the year, foreign investors accounted for 75.4 percent of total traded volumes on the counter.
Since the beginning of this year, the stock has gained 4.1 percent. The company’s ability to continue to generate record profits — combined with a generous dividend policy that sees it pay out 80 percent of net earnings to shareholders — helped maintain demand through a bear run that gripped the NSE between 2015 and mid last year.
Safaricom has managed to make large capital investments in telecommunications infrastructure, introduce new services and pay incremental dividends with minimal debt and without seeking additional funding from shareholders.
The firm has therefore been able to build up cash reserves quickly, culminating in two special dividend pay-outs in the past four years.
In the year ended March 2019, the company declared a final dividend per share of Sh1.25 and an additional special distribution of Sh0.62 per share, bringing the total to Sh74.92 billion.
It had also paid a special dividend of Sh0.68 per share during the financial year ending March 2017, on top of an ordinary dividend of Sh0.97 a share.
Driven by growth in M-Pesa revenue, the firm’s net profit for the year ending March 2019 rose by 14.7 percent to Sh63.4 billion.
In the six months to September 2019, its profits recorded a similar margin of growth — 14.4 percent to Sh35.65 billion — again on strong M-Pesa and mobile data revenue performance.
Egyptian investment firm EFG Hermes Holding said in their 2020 yearbook markets report that the rise in profitability and market capitalisation of Safaricom and large banks, while the rest of the market lags behind, will see their dominance become more entrenched at the NSE.
These are the stocks most likely to benefit from an expected return to the equities market by local institutional investors, who have in the past three years tended towards the fixed income segment. “Local institutions remained invested in fixed income for most of 2019, but the impact of the rate cap repeal on local rates and monetary easing could force more local institutional money back into equities in 2020,” said EFG Hermes in the report.
Safaricom’s influence on the market has, however, had the effect of skewing the performance trends of the main indices, depending on whether they are weighted on price or market capitalisation.
The market cap weighted NSE All Share Index is currently at a 16-month high of 171.36 points, reflecting the positive effect of the huge weight that Safaricom has on the index due to its valuation.
On the other hand, the price weighted NSE 20 share index, where blue chips with a high nominal price (such as BAT Kenya, Bamburi, EABL and Standard Chartered) carry more weight, has benefitted less from Safaricom’s gain.
It closed at 2,701 points on Friday, which is below its 2020 high of 2,707 points recorded on January 3.

Source:Business Daily

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Absa lending capacity boosted with $497m guarantee




One of the largest diversified financial service providers in Africa, Absa Group has announced that its lending capacity will increase following a $497m guarantee singed between the South African-based banking group and Multilateral Investment Guarantee Agency.
The guarantee, which was implemented by Absa Group recently, will help the bank expand financing across seven countries in Sub-Saharan Africa.
It further added that, “This creates an opportunity to grow lending, with focus on increasing sustainable financing for corporates and small and medium-sized businesses, as well as projects with climate benefits”.
Absa said Multilateral Investment Guarantee Agency, a member of the World Bank Group, will issue guarantees of $497m for as long as 15 years in Absa’s subsidiaries in Uganda, Ghana, Kenya, Mauritius, Mozambique, Seychelles and Zambia.
It explained further that the guarantees will help to protect Absa against risks related to mandatory capital reserves, free up financial capacity, enable Absa’s subsidiaries to provide additional lending and generate more revenue.
According to Mr Jason Quinn, the Absa Group financial director, he said that,” The guarantee allows us to provide additional financing in our subsidiaries in Uganda, Ghana, Kenya, Mauritius, Mozambique, Seychelles and Zambia.”
Absa Group Limited (‘Absa Group’) is listed on the Johannesburg Stock Exchange and is one of Africa’s largest diversified financial services groups.
Absa Group offers an integrated set of products and services across personal and business banking, corporate and investment banking, wealth and investment management and insurance.
Absa Group has a presence in 12 countries in Africa, with approximately 40 000 employees.

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$33m German bank cash to support 10,000 SMEs




The African Guarantee Fund (AGF) recently said the additional $33 million financing from German lender KfW Development Bank it received will help realise its goal of providing financial guarantees for over 10,000 Small and Medium-sized Enterprises (SMEs) in Africa yearly.
This, it said, would be achieved through partnering financial institutions and as a trickledown effect, create 30, 000 jobs yearly.
According to the Group Chief Executive Officer (CEO), Felix Bikpo, he said that the new capital injection in AGF came when the continent’s SME sector has been singled out as a key driver of growth.
He said it will catapult AGF’s efforts to enable African SMEs continue to play their critical role in driving Africa’s economy.
Bikpo said the new financing now placed AGF firmly on the driver’s seat as the champion that eases access to financing for SMEs across the continent.
He stated further that, “We are excited about the confidence our shareholders and partners have in what we are doing in Africa. This capital injection will go a long way in ensuring that we continue to make a positive impact in the continent.
“So far, we have cumulatively issued more than $1 billion worth of guarantees, making available about $1.7 billion for SME financing through our partner financial institutions. This has led to the creation of more than 100, 000 additional jobs”.
He said of the 20, 000 African SMEs from various economic sectors that have so far benefited from AGF guarantees, the institution is very proud that 60 per cent of these SMEs are owned by youth who are the majority in Africa.
Bikpo added that 30 per cent of the SMEs are owned by women, adding that youths and women are demographics that heavily impact Africa’s economy.
His words: “Our experience traversing Africa has shown us that women in Africa are tenacious entrepreneurs, even though they face a gender financing gap of $42 billion.
“The capital increase from KfW will largely be used to increase financing of women owned or led businesses.
“This is in addition to our partnership with the African Development Bank (AfDB) through the recently launched Affirmative Finance Action for Women in Africa (AFAWA) which currently has a $251 million commitment from G7 countries.”
The AGF was founded by the government of Denmark through the Danish International Development Agency (DANIDA), the government of Spain through the Spanish Agency for International Cooperation and Development (AECID) and the AfDB.
Other shareholders include: French Development Agency (AFD), Nordic Development Fund (NDF), Investment Fund for Developing Countries (IFU) and KfW.

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